'This Week' Transcript: NEC Director Larry Summers

April 4, 2010

Page 5 of 15

Remember, as of now, inventory change is zero, the level of
inventories is at the absolutely low level, and all of the people who
are in the business to see what the tightness of markets are, are
saying effectively that there's a shortage of inventories out there
and we're on the edge of a significant build-up.

TAPPER: As the -- you mentioned real estate. And I've heard a
lot of economists talk about their fear of the -- the commercial real
estate bubble popping. How concerned are you by that?

GREENSPAN: Well, I think it's already popped, in a sense. I
mean, real estate prices generally are down almost 50 percent. And
they've come back a little bit...

TAPPER: I mean the kind of crisis that we saw with the -- with
the subprime housing and personal housing.

GREENSPAN: Yes. Yes, with prices already down and adjusted, if
we were going to get severe secondary reactions, they would have
likely -- would have occurred, and they would have occurred if it
weren't for the fact that the rest of the economy is showing some
degree of buoyancy.

TAPPER: Now, Dr. Summers didn't really answer the question, but
-- but I was wondering your thoughts on whether or not we can expect,
if there is accelerated job growth, whether or not you think there
will be any dips in that, including into negative job growth, or if
you think it's just going to be a straight line.

GREENSPAN: You mean month-by-month increases?

TAPPER: Yes, month-by-month.

GREENSPAN: I suspect it's month by month. I mean, it's -- I can
-- you know, a statistical aberration possibly, but the momentum is
very clearly there, and I doubt very much that we're going to run out
of that momentum until very late in the year.

TAPPER: So no double-dip recession?

GREENSPAN: I think the odds of that have fallen very
significantly in the last two months.

TAPPER: The president signed massive health care reform
legislation into law a few weeks ago. You have expressed concern
about the legislation, as it was making its way through the process,
about whether or not it did enough to contain costs. What did you
think about the final legislation? Does it contain costs enough?

GREENSPAN: Well, the CBO, incidentally, Congressional Budget
Office, which is really a first-rate operation, says that it does.
The problem is not their estimates, but the range of potential error
in those estimates.

And when you're dealing with an economy in which debt is becoming
-- federal debt is becoming ever increasingly a problem, it strikes me
that when you're dealing with public policy and you're in a position
where you have to ask yourself, "What happens if we are wrong?"

In other words, in the case now, where our buffer between our
capacity to borrow and our actual debt is narrowing, for the first
time, I think, in the American history, there's a question, supposing
we are wrong on the cost estimates, and, indeed, they are actually
much higher than the best estimates can generate, the consequences are
very severe, whereas if they are too high, it's very easy to adjust.

So I think it's -- it's -- there's an issue over and above the
question of what's the best cost estimate. There's a policy strategy
here which I think requires us to lean in an ever more conservative
area with respect to judging...

(CROSSTALK)

TAPPER: So it might have been too rosy, the projections, you're
saying?